Zero percent balance transfer credit cards can be a good way to save money. If you have a big balance on any of your current credit cards, transferring the balance over to a zero percent credit, the savings from not having to pay high interest can really add up. If you have $5,000 balance with 20% APR on your credit card, you can save up to $1,000 in interests alone in one year. I’m sure you think of quite a few ways to spend that $1,000 elsewhere.
How Does Zero Percent Balance Transfer Work?
Depending on the credit card, there’s a balance transfer fee, typically anywhere from 3-6% of the transfer amount. So, if you’re transferring $5,000 over to your new credit card, the fee can be $60-120. If there’s no balance fee, then it’s completely free! That’s all there is to it. There’s no catch!
Things To Be Wary Of
Although the interest rate on the balance transfer is zero, that’s only during the promotional period. After this promotional period ends, the APR will return to the normal rates, which can be as high as 20%, sometimes even higher. So be cautious of the length of the promotional length and also the post-promotion APR. If the promotional period is less than 12 months, I would stay away from it and look for other competing cards. Make sure you read the fine print before applying for any cards.
Be Responsible
With any credit cards, if you’re not careful, you can put yourself in great financial danger. Don’t just sign up for a zero balance transfer credit cards without a game plan. Always have a purpose and goal and always stick to it. A friend who made plenty of mistakes after became debt free. During that time, he took advantage of such credit card. He accumulated a pretty decent credit card debt over the years and was looking for ways to help him pay it off quicker. Once he transferred all of the balance to his new credit card, he “forgot” about the purpose and reason when he realized that the interest on his new balance was 0%. Instead of making payments to reduce his debt, he made minimum payments and pocketed the rest. All of sudden, he had “extra” spending money. After the promotional period ended, the normal interest rate kicked in at 20.99%, higher than his previous card. Had he stuck with his original plan, he could have been credit card debt free by the time the promotional period ended. Instead he was back to square one and a year wasted.
Current Promotions
There are a few good current promotions going on right now. Do your own diligence and make sure the card you choose is the right card for you.
- Discover® More Card – $0 Balance Transfer Fee!- Not only will you save money from 0% interest, you will also save money from not having to pay any balance transfer fees with this card. 0 fee on balance transfer and 0% APR on balance transfers for 12 months. Also enjoy 0% APR on any purchases made with this card for 12 months as well! There is no annual fee with this card. For your information, there are a few variations of the Discover More Card. To ensure you receive this promotion, please click on the link provided. When you go to Discovercard.com website directly, all the promotions are not clearly outlined and you risk of signing up for the wrong card.
- Capital One® Platinum Prestige Credit Card – Enjoy 0% APR on balance transfers and purchases until March 2013. That’s nearly 14 months of interest free payments! Balance transfer is only 3% of the transfer amount. There is no annual fee with this card.
- Citi® Platinum Select® MasterCard® – This card offers 21 months of interest free on purchases and balance transfers. There’s a 3% fee on balance transfer but carries no annual fee. Also enjoy cashback rewards with Citi’s cashback rewards program.
- Citi Simplicity® Card – This card is similar to Citi Platinum Select so you will enjoy 21 months of free interest in balance transfers and purchases. This card also carries a 3% fee on balance transfers. However, there is no cashback rewards program, but you can enjoy a peace of mind in not having to pay any late payments.
- Capital One® Cash – Receive $100 cash back bonus when you spend $500 in 3 months of account opening. Earn 1% cash back on all purchases and additional 50% on what you earn every year. Enjoy 0% interest on balance transfers and purchases until December, 2011. Balance transfer fees are 3% and there is no annual fee.
- Discover® More® Card – Balance Transfer Fee - Enjoy 0% interest in balance transfers for 18 months, but only 6 months for purchases. Also enjoy Discover’s cash back rewards program, Shop Discover and earn additional cash back on all purchases. Balance transfer fee is 3% and there is no annual fee.
- Slate® from Chase – Balance transfer and purchase APR is 0% for 12 months. Waive 3% balance transfer fee is transfer is made within 30 days of account opening. There is no annual fee with this card.
If you have a car loan, you can use 0% balance transfer credit cards to pay off your car quicker and save money!
photo: morguefile.com
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{ 2 comments… read them below or add one }
While I think that it’s possible to use 0% balance transfers to reduce debt faster, I think people have to be sure to immediately CUT UP their old card if they do so. (And of course to make sure they’ll be paid off before the normal rates kick in.) In general though I think too many people who have debt use things like this to try to get out of debt when what they really need to be doing is no longer borrowing money.
Jackie recently posted..Stick to Your Guns on Staying Out of Debt
I agree completely. Opening up a new credit card, even for balance transfer purposes can lead you to more debt if not used carefully. But if used properly and responsibly, it can be a great way to save money by not having to pay interest.
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